Swan glows as economy slows

ArticleData Array ( [Article] => Array ( [article_id] => 1001326 [headline] => Swan glows as economy slows [abstract] => The latest national accounts figures are a positive outcome for Australia, Treasurer Wayne Swan says despite data which showed the economy had slowed considerably. [keywords] => Australia, economy, finance, Swan, growth, recession [content] =>

The latest national accounts figures are a positive outcome for Australia, Treasurer Wayne Swan says despite data which showed the economy had slowed considerably.

Figures released by the Australian Bureau of statistics showed economic growth crawled to its slowest pace in eight years, rising by just a seasonally-adjusted 0.1 per cent in the September quarter.

 

This was even weaker than the slim 0.2 per cent increase economists had expected.
   
Gross domestic product (GDP) in the September quarter national accounts showed annual growth was 1.9 per cent.

Despite the grim news Mr Swan was optimistic. 

"This is a positive outcome for Australia, particularly in the context of a global recession," Mr Swan told reporters in Canberra.
   
Mr Swan said the United States, Britain, Germany, Italy, Spain, Japan, Singapore and Hong Kong all recorded negative growth in the three months to September.

"Something like two-thirds of OECD economies are expected to contract in 2009," he said.
   
"So while other economies are contracting, our economy continues to grow."
   
There was more resilience in the Australian economy than in the rest of the world, Mr Swan said.
   

Slow moving

 

The national accounts showed households were pulling back on spending, with consumption growing by just 0.1 per cent in the quarter as families focussed on rebuilding savings.

New business investment rose by a solid 1.8 per cent in the quarter.
   
Australia could not resist the pull of global forces, Mr Swan said.
   
But there was a range of factors working in the nation's favour, including the government's economic stimulus package, more than $8 billion of which will find its way into the real economy this month.
   
A 300 basis points reduction in interest rates since September, lower petrol prices, and a depreciation in the exchange rate were also helping.
  
Consumer spending - which makes up 60 per cent of domestic demand - was mediocre during the quarter on the back of 12-year high interest rates earlier in the year.
   
The RBA has since slashed interest rates in the face of a global economic slump, cutting the cash rate by 300 basis points to 4.25 per cent in the space of four months.
   
Economists expect the central bank to follow up Tuesday's one percentage point rate cut with a further reduction in February,

Financial markets are pricing in a cash rate trough of below three per cent by mid-2009.
 

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[content] =>

Treasurer Wayne Swan says Australia is still on track for a modest budget surplus next financial year, but will not rule out a deficit if it emerges as the "responsible" option.

Swan says quarterly national account figures due out today will prompt debate about the nation's economic standing.

But he told Fairfax radio the government and the Reserve Bank are working in tandem to strengthen the economy in the face of the global slowdown and if Australia does have to go into the red it should only be temporary.

Tuesday's announcement of a fourth successive Reserve Bank rate cut helped government moves to strengthen the Australian economy, he said.

"We are moving swiftly to strengthen the Australian economy. That's why we put the strategy in place and we are now working in tandem ... with the Reserve Bank," he said.

Mr Swan said the release of quarterly national account figures in Canberra on Wednesday would prompt debate about the nation's economic standing.
   
"Later today we'll have some growth numbers out there and there will be a debate about what they all mean, but what the Australian government is doing and has been alert to ... is that there has been international slowdown," he said.

"The good thing is you've now got monetary policy, you've got something like a three per cent cut on interest rate cuts over four Reserve Bank board meetings.

"That cut in monetary policy is now working in tandem with strengthening of fiscal stimulus in the economy. We've also got the exchange rate effect happening out there. We've also got lower petrol prices as well.
   
"All of those things will stimulate activity in the face of this profound slowdown in international activity."

Mr Swan would not commit to a budget surplus next year but said current projections should keep the government out of the red.

"We're currently projecting modest growth and modest surpluses," he said.

"If a temporary deficit was required to invest in the economy and to strengthen growth then that would be the responsible thing to do. But what we're doing through the economic security strategy and through the easing of monetary policy is everything to strengthen the economy and to take the rough edges off what's flowing through from the rest of the world."
   
Mr Swan added that if Australia should incur a deficit, the government would want it "to occur for the shortest possible period".
 

[content_type_id] => 3 [site_name] => World News Australia [articledate] => 3 December 2008 [articletime] => 3 December 2008 [display_order] => 1 ) [1] => Array ( [article_id] => 1001248 [headline] => Homeowners get Christmas bonus [abstract] => The Reserve Bank of Australia has cut interest rates by a full 100 basis points, bringing the cash rate to 4.25 per cent. [content] =>

The Reserve Bank of Australia (RBA) has cut interest rates by 100 basis points, bringing the cash rate to 4.25 per cent.

The move follows severe global economic downturn and a slowing Australian economy.

Shortly after the rate decision, Federal Treasurer Wayne Swan announced in parliament that the Commonwealth Bank would pass on the full 1 per cent rate cut.

 The bigger than expected cut by the RBA is now the lowest in more than six years.

Last month the RBA made a similar move, cutting interest rates by 75 basis points.

Coalition MPs have called on the big banks to pass on today's entire cut to home owners.

Opposition frontbencher Christopher Pyne urged the banks to show some pre-Christmas spirit.

"Banks should pass on the full rate cut, whatever it is, to consumers," he told reporters.

Earlier, an investment specialist called on the RBA to cut rates by up to two per centage points, to avoid an economic train wreck.

The boss of FIIG Securities Jim Stening says the risk of overstimulating the economy pales in comparison to what would happen if the RBA cuts rates too slowly, as our major trading partners go into recession.

Meanwhile lower interest rates and falling petrol prices have lured consumers back to the shops, spending $18.4 billion in October.

Retail spending rose by a seasonally-adjusted 0.7 per cent in October compared with the previous month, Australian Bureau of Statistics (ABS) data released on Tuesday shows.
   
Tuesday's data takes into account the 125 basis points worth of cuts by the RBA in September and October.

The central bank cut the rate by a further 75 basis points in November.

There was also brighter news on Australia's international trade position with the current account deficit narrowing to $9.74 billion in the September quarter, from $14.04 billion in the
previous quarter.

The data feeds into the September quarter gross domestic product which is due for release on Wednesday.

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